FPL Group is a far different company today than the one Jim Broadhead joined in January of 1989 when he became president and chief executive officer.
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FPL Group was then engaged in a number of businesses unrelated to its core electric skills, including insurance and financial services, real estate, cable television, and agriculture. The company's principal subsidiary, Florida Power and Light, was considered a well-managed utility with an emphasis on quality. However, the utility's spiraling costs had resulted in electric rates among the highest in the Southeast.
Today, FPL Group is nationally known as a high quality, efficient, and customer-driven organization focused on energy-related products and services. With a growing presence in more than a dozen states, it is widely recognized as one of the country's premier power companies. FPL's rates are among the lowest in the industry, due primarily to a decade-long emphasis on reducing costs. At the same time, the utility's performance is vastly improved with productivity and reliability at all time highs.
The transformation of FPL Group from a traditional, old-fashioned utility to a proven winner in both regulated and deregulated markets began soon after Mr. Broadhead arrived.
Based on his experience in the natural resources and telephone industries -- and taking into account the mood of the nation regarding competition -- Mr. Broadhead thought it likely that the electric business would follow other industries previously deregulated. He further believed that in such a rapidly changing business environment, the strategies, procedures, and structures that had served the organization well in the past might no longer be appropriate.
Early in 1990, after succeeding Mr. McDonald as chairman, Mr. Broadhead sought the help of teams of employees to help develop and initiate a comprehensive strategic plan. From this plan emerged a two-fold corporate strategy to improve utility operations while seeking growth opportunities in non-utility activities related to skills already in place. This meant concentrating on what the company did best -- generating electricity -- and getting out of non-energy-related businesses.
To achieve this strategy and ensure the company's long-term success, Mr. Broadhead asked employees to focus on four areas: cost-effective operations; a commitment to quality; strong customer orientation; and speed and flexibility. He pointed out that, with the exception of quality, the organization was weak in these critical areas.
With respect to quality, Mr. Broadhead believed FPL's award-winning quality efforts could be even more effective. Again, with the assistance of an employee team, he revamped the quality process to make it less formal and more flexible, and he encouraged employees to be more creative in their approach to solving problems.
In addition to a new approach to quality, Mr. Broadhead made his feelings known on other important issues that would profoundly change the company's culture and make it a better place to work. He stressed to employees the need for individual initiative and accountability. He also encouraged employees to take better care of themselves and went on to establish the FPL Wellness Program to help meet their fitness and health-related needs.
In 1991 FPL underwent a top-to-bottom restructuring and re-staffing. The entire organization was streamlined, layers of management were reduced, and bureaucratic procedures eliminated. That same year the sale of the Colonial Penn insurance subsidiary launched the beginning of the company's divestiture program and confirmed its refocus on the power business.
The results of restructuring and focusing on lowering costs became evident the following year. While the company drew rave reviews for the timely and efficient manner in which it restored power in the devastating wake of Hurricane Andrew, it also achieved record financial results.
In late 1992, passage of the National Energy Policy Act signaled additional changes in the industry, prompting a cost reduction program to be initiated in 1993. Despite the significant reductions, FPL's performance continued to improve. Most notably perhaps, the Turkey Point nuclear plant, which had been on the Nuclear Regulatory Commission's "watch list" when Mr. Broadhead joined the company, received its best NRC rating ever.
In 1994 -- in a bold and unprecedented move that took the entire electric utility industry by surprise -- Mr. Broadhead announced a new financial policy that included reducing FPL Group's common stock dividend by nearly one-third. This put the company's percentage of corporate earnings paid as dividends in line with other competitive industries.
The dividend reduction initially drew heavy criticism, but the financial community quickly endorsed the move as a reflection of FPL Group's emergence as a growth company. As one analyst said, "This early and aggressive action will further enhance an already sound competitive profile."
In 1995, Mr. Broadhead's peers selected him Financial World magazine's "CEO of the Year." By that time the actions taken by Mr. Broadhead were producing a multitude of benefits for the company, including improved credit ratings, positive cash flow for the first time in years, and rising stock value. In recognition of the company's achievements, Fortune Magazine in 1998 declared FPL Group "the brightest light in utilities" and America's "most admired" power company.
During the remainder of the 90s and into the 21st century, FPL continued to achieve significant improvements in service, reliability, and plant performance while operating and maintenance costs continued to be driven down. In 1999 a rate reduction agreement -- made possible because of the utility's increased efficiencies -- lowered residential base rates by nearly nine percent and provided customer savings of more than $1 billion.
Outside of Florida the company was beginning to take advantage of new growth opportunities through FPL Energy, which rapidly established its presence in the independent power business as a leader in the use of environmentally friendly fuels and renewable energy sources. FPL Energy's contributions to earnings increased significantly. And in 2000 a new subsidiary called FPL FiberNet was launched, which soon became Florida's leading wholesale provider of fiber optic services.
When he joined the company, Jim Broadhead's objective was to build on the solid foundation of FPL and its energy-related expertise to strengthen FPL Group and build long-term shareholder value.
During his 13-year tenure, FPL's power capability expanded by nearly one- third while non-utility power production increased more than seven-fold. Overall, the company's power capacity grew almost 50 percent to nearly 25,000 megawatts. This helped to nearly double the value of FPL Group from $4.7 billion to more than $9 billion and rewarded shareholders with an annualized total return well above the industry average.
Customers, meanwhile, were rewarded with the lowest electric rates since 1984.
"I think what pleased me most during my time here was our ability to add more than a million new customers without increasing rates," says Mr. Broadhead. "This has made people's lives a little easier and reduced the costs companies pay for energy, making it possible for them to create jobs. It has made Florida an even more attractive place to live and work."
1989 - James L. Broadhead succeeds Marshall McDonald as FPL Group
president and chief executive officer.
1990 - Broadhead named chairman of FPL Group.
Initiated comprehensive strategic plan.
Established corporate strategy.
Created new Vision Statement.
1991 - FPL utility organization restructured.
Divestiture of Colonial Penn.
1992 - FPL's Hurricane Andrew restoration effort draws praise.
National Energy Policy Act enacted.
1993 - Cost reduction program initiated.
1994 - Dividend cut surprises industry.
New Martin combined-cycle power units enter service.
1995 - Six-year string of record financial results begins.
Financial World names Mr. Broadhead "CEO of the Year."
1998 - FPL named No. 1 utility of Fortune's "Most Admired."
Fossil and nuclear plant availability at or near all time highs.
1999 - $1 billion three-year rate reduction agreement begins.
Mr. Broadhead named president of the Foundation for the Malcolm
Baldrige National Quality Award.
2000 - FPL O&M costs per kWh down 10th consecutive year; 40% since 1990.
FPL Energy increases generating portfolio to 4,100 megawatts.
FPL FiberNet launched as new subsidiary.
2001 - Mr. Broadhead announces retirement effective at end of year.
Lew Hay appointed president and CEO of FPL Group.
FPL Group, with annual revenues of more than $8 billion, is one of the nation's largest providers of electricity-related services. Its principal subsidiary, Florida Power & Light Company, serves approximately 3.9 million customer accounts in Florida. FPL Energy, LLC, an FPL Group energy-generating subsidiary, is a leader in producing electricity from clean and renewable fuels. Additional information is available on the Internet at http://www.fplgroup.com/, http://www.fpl.com/ and http://www.fplenergy.com/.
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EDITOR'S ADVISORY: FPL Group, Inc. announced today that James L.
Broadhead, chairman, will retire at the end of the year. He will be succeeded
by Lew Hay, who also serves as president and chief executive officer .
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SOURCE: FPL Group, Inc.